05 Feb 2009

Greenhouse Gas Storage Bill 2008 (Qld)

by Martin Aylward, Prudence Harvey

The Queensland Government has established a tenure system for greenhouse gas storage and exploration for storage spaces. Mining and petroleum tenement holders should be wary of this added layer of complexity in their tenement rights.

The Greenhouse Gas Storage Bill, currently before the Queensland Parliament, creates a stand-alone legislative regime (as opposed to an amendment of the petroleum regime) which creates a new tenement framework for the storage of greenhouse gas in Queensland.

The Queensland Bill mirrors the current mining and petroleum tenement regime and creates both exploration and production tenements. However the Bill fails to offer certainty in respect of responsibility for long-term liability of storage sites. There is no set date for the State to take over responsibility for storage sites, which can occur on the discretionary approval by the Minister only. Furthermore, any common law liability associated with the storage site will remain with the holder of the lease. These concerns, unless rectified before the legislation is passed, may act as a deterrent for investors.

GHG stream

A GHG stream is defined in the Bill as a stream of carbon dioxide or a substance that overwhelmingly consists of carbon dioxide (section 12). GHG stream storage is the process of injecting a GHG stream into a GHG storage reservoir for the purpose of storing the GHG stream. The Bill makes clear that the operation of enhanced petroleum recovery activities where GHG is pumped into a reservoir to improve recovery of petroleum as authorised under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) is not GHG storage. This removes an anomaly from the draft legislation that would have required existing petroleum tenement holders to obtain a GHG licence to conduct enhanced petroleum recovery.

Greenhouse gas titles

The Bill establishes three new authorities:

  • GHG exploration permit
  • GHG data acquisition authority
  • GHG injection and storage lease

A GHG Exploration permit will be granted following a competitive tender process. Each permit has a maximum period of 12 years, although renewals are possible for a period of up to 12 additional years. An exploration permit authorises the exploration of GHG storage spaces, evaluation of their feasibility and incidental activities. Storage injection testing may be undertaken but only water or a GHG stream can be used.

GHG data acquisition authority allows a holder to carry out geophysical surveys on land that is contiguous to land in the GHG tenure area, provided that land is not in the area of another GHG tenure. The authority also allows for the entry onto the land to carry out the geophysical surveys.

A GHG lease can be granted to the holder of a GHG exploration permit or following a competitive tender process. It permits the exploration of GHG storage spaces, the evaluation of their feasibility, the compressing or processing of a GHG stream, the storage of a GHG stream, the construction of GHG stream and water pipelines and incidental activities. GHG stream storage must commence within five years of the grant of the lease (section 167).

The GHG lease does not have a fixed term and continues in force until it is surrendered or otherwise ends under the proposed Act. A GHG lease can only be surrendered after approval is given by the Minister, which will not be given until all injection has ceased and wells are decommissioned, the risks associated with the stream storage have been reduced as much as is reasonably practicable and all of the relevant environmental authority has been cancelled or surrendered. There is no obligation on the Minister to permit a surrender, as the Bill reads "The Minster may approve a surrender". After termination, the GHG stream becomes the property of the state, however common law tortious liability will remain with the original leaseholder. As there is no set time-frame after decommissioning in which a lease can be surrendered and an apparent lack of any obligation on the part of the Minister to allow the surrender, the level of uncertainty for project proponents is increased.

Interaction with other resource tenements

The Bill proposes processes to be followed for applications for GHG tenures where there are mining or petroleum tenements overlapping. The system is similar to that currently in place under the Mineral Resources Act 1989 (Qld) and the Petroleum and Gas (Production and Safety) Act 2004 (Qld) where some priority is given to pre-existing tenements and to production tenements.

Amendments to other Acts

The Bill proposes minor amendments to 26 Acts and major amendments to three Acts, including:

  • Environment Protection Act 1994 (Qld): The Bill will amend the definition of Environmentally Relevant Activity to include Greenhouse Gas Storage Activities and therefore include GHG storage activities as an activity for which an EIS is possibly required. It also inserts a new Chapter 5A to require an Environmental Authority for GHG storage activities.
  • Mineral Resources Act 1989 (Qld): The Bill proposes to insert a new Part 7AAC into the Act that contains detailed provisions to mirror those contained in the Bill regarding overlaps between GHG tenures and mining leases and exploration permits.
  • Petroleum & Gas (Production & Safety) Act 2004 (Qld): The Bill proposes to amend the purpose of the Act to include the facilitation of the proposed Bill. It will also amend the definition of pipeline to include the transportation of GHG streams (section 537) and insert a new Chapter 3A relating to the provisions for GHG authorities. Again, this new chapter outlines the process for dealing with overlaps between GHG and petroleum tenures.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.